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Reverse Logistics: Gold in the Returns

Merchants in competitive environments usually have more liberal return policies reducing their customers’ risk and driving sales.

Returns

Four to six percent of retail purchases are returned. When it comes to computers and electronics: eight to 12% head back to the retailer. Truly defective returns are typically less than 20% of the products processed through a return center.

Merchants typically allow customers to return a product for any reason. A merchant in a competitive environment usually has a more liberal return policy reducing their customer’s risk and driving sales. While a merchant in a less competitive market can usually dictate the terms of a return.

Reverse Logistics

The process of sending a product back down the supply chain is called reverse logistics. Reverse logistics is often over looked as a revenue stream because the savings are not necessarily visible. However reverse logistics is critical for retailers. 95% of customers will not buy from a company if they had a bad return experience. According to a 2010 Aberdeen Group study, merchants will spend 9%-15% of their total revenue on returns.

A good reverse logistics operation takes a product from a total loss to an opportunity for a resale while retaining customers. Companies often set up a separate return operation from their forward distribution activities with its own dedicated executive team leaders.

A good reverse logistics operation takes a product from a total loss to an opportunity for a resale while retaining customers.

Outsourcing

Because reverse logistics can stand on its own, a majority of retailers and manufacturers outsource some or all of their returns. By outsourcing to a third party logistics provider (3PL), retailers can focus on their core competencies. Below are a few more reasons retailers outsource their reverse logistics:

A 3PL already has experience and expertise in reverse logistics.

Achieves greater flexibility and faster speed to market.

Creates a protective barrier against outside forces to limit liabilities.

A quality 3PL should be able to set up a new reverse logistics operations in less than six months.

Key Recommendations

FW Warehousing is headquartered in St. Louis, Missouri with Midwest warehouse distribution centers in Kansas City, Indianapolis and St. Louis totaling more than four million square feet. Founded in 1949 with a focus on food-grade storage, FW later broadened its services to include contract warehousing, dry storage, hazardous material and chemical storage, temperature-controlled storage, product distribution and B2B and B2C fulfillment.

FW Warehousing has more than 50 years of experience in third-party 3PL logistics and has been ranked in the top 100 Third Party Logistic Companies in the country by Inbound Logistics magazine.